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Corporate social responsibility


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Corporate social responsibility

  1. 1. Organizational Dynamics, Vol. 37, No. 2, pp. 125–144, 2008 ISSN 0090-2616/$ – see frontmatterß 2008 Elsevier Inc. All rights reserved. doi:10.1016/ Understanding and developing strategic corporate social responsibility PETER A. HESLIN1 JENNA D. OCHOAC reation of shareholder wealth, once considered the ultimate corporateobjective and yardstick of organizational Mark Kramer, is to undertake CSR in a stra- tegic manner by making social and environ- mental contributions only in ways that alsovalue, is slowly becoming overshadowed enable tangible business benefits. However,by a broader conception of organizational imitating other organizations’ strategic CSRsuccess. In 2006, about one in every ten ‘‘best practices’’ would be imprudent for thedollars of assets under management in the same reason that benchmarking often leadsU.S. – an estimated $2.3 trillion out of $24 to disappointing results. Organizational lea-trillion – was invested in companies that rate ders tend to inadequately appreciate thehigh on some measure of social responsibil- subtle differences in organizational compe-ity. In 2007, 64% of the Fortune Global 100 tencies and contexts whereby a given prac-published a Corporate Social Responsibility tice enables one organization to fly, but leads(CSR) report outlining their economic, envir- others to flounder. Thus, we argue that effec-onmental, and social performance. Many tive CSR initiatives are those derived fromlarge companies, such as General Motors, careful analysis of each organization’sProcter & Gamble, and Vodafone, now have unique culture, competencies, and strategica senior level corporate officer who is opportunities. Fortunately, organizationalcharged with directing the organization’s leaders do not have to reinvent the wheel.corporate social initiatives. While the particular CSR practices that some In contrast to debates over the last dec- organizations adopt might not necessarily beade about whether organizations have a useful for others, many of the principlessocial responsibility and whether CSR per- underlying them are applicable to a wideformance predicts corporate financial per- range of organizations. After briefly review-formance, business leaders are increasingly ing the history and nature of strategic CSR,concerned with how their organization can as well as why many organizations are striv-prosper from addressing social and environ- ing for CSR, we outline a range of examplesmental challenges. One widely accepted of strategic CSR undertakings. The 21guideline, advanced by Michael Porter and exemplary CSR practices we discuss areAcknowledgments: We thank Peter Cappelli, Carolyn Jennings, John Slocum, and Theo Vermeulenfor valuable input on an earlier draft of this manuscript. This paper is dedicated to the lifetime ofinspiring social contributions made by the Australian Distinguished Professor Dexter Dunphy. 1 The authors contributed equally and so are listed alphabetically. 125
  2. 2. clustered into seven principles for enacting production and consumption. Human sus-strategic CSR. These principles could serve tainability involves creating an equitable,as a guiding stimulus for other organizations developmental, and healthy workplace forintent on discovering and capitalizing on employees, as well as adding value to stake-their unique opportunities to do well by holders including suppliers, customers, anddoing good. other community members. Such value- added initiatives can be delivered to external stakeholders through avenues including the provision of educational, health, career,THE ROOTS AND NATURE OF energy-saving, pollution-reducing, or envir-CORPORATE SOCIAL onmental beautification opportunities.RESPONSIBILITY According to Chad Holliday (2001, p.CSR has roots in a pivotal 1953 decision by 134), chairman and CEO of DuPont:the New Jersey State Supreme Court which Sustainable growth should be viewed notremoved legal restrictions on corporate phi- as a program for stepped-up environ-lanthropy. A shareholder who objected to mental performance, but as a compre-Standard Oil donating money to Princeton hensive way of doing business; one thatUniversity brought a lawsuit against Stan- delivers tremendous economic value anddard. The court ruled in Standard’s favor, opens up a vast array of new opportu-accepting the argument that its donations to nities. Capitalizing on these benefits mayPrinceton’s Engineering Department were require relentless determination andintended to benefit Standard Oil by helping tenacity, but ultimately companies willto educate future potential employees. This find that they can generate substantialdecision paved the way for other companies business value through sustainability,in the United States to engage in corporate while both enhancing the quality of lifegiving. CSR initiatives increasingly involve throughout the world and protecting thestrategically directed donations of equip- environment.ment or core employee skills. There are various definitions of CSR, but By virtue of being self-sustainable, stra-most share the theme of engaging in econom- tegic CSR can become an integral and invalu-ically sustainable business activities that go able part of business strategy and operations,beyond legal requirements to protect the rather than merely off-the-shelf or sponta-well-being of employees, communities, and neous ‘‘good deeds.’’ Developing prudentthe environment. Strategic CSR seeks to do CSR is thus much less a matter of organiza-this in ways that simultaneously create tan- tional imitation than real-time customiza-gible business benefits, thereby being finan- tion.cially self-sustaining and less prone toeliciting outcries about squandering share-holder wealth. Granted that CSR includes Complicating Factorsboth environmental and human sustainabil-ity components, we follow CSR scholars who Many organizations appear to be strong inuse the terms corporate sustainability and some areas of CSR performance yet weak inCSR synonymously. others. Should Wal-Mart Stores be deemed Environmental sustainability involves socially responsible for providing low-pricedusing scientific insights to reduce the envir- goods for impoverished and budget consciousonmental footprint of an organization’s customers, or irresponsible for paying itsoperations and products. Doing so can help employees low wages, providing minimalto address issues including the earth’s dimin- health care benefits, and for adversely affect-ishing supply of nonrenewable resources ing independent merchants? Does BP exhibitand capacity to absorb the waste from our CSR by recognizing and striving to address126 ORGANIZATIONAL DYNAMICS
  3. 3. global climate change, or is it irresponsible for These include growing consumer demandcontinuing to produce fossil fuels? Is Hewlett- for responsibly made products, challengesPackard socially responsible because of its to organizations’ reputations by nongovern-community development initiatives, or lack- mental organizations (NGOs), industrying CSR for abandoning its long-standing codes of conduct, assessments and rankingspolicy of guaranteeing job security? Given of CSR performance, pressure from sociallythe complexity of such issues, our intention responsible investors through public interestin this paper is to offer principles to guide the proxy resolutions, as well as the sociallyidentification of strategic CSR initiatives, conscious values of organizational managersrather than to imply judgments regarding and employees. Issues such as disparities inthe overall CSR of particular organizations. access to quality education, employment, Enron undertook admirable social initia- and healthcare are gaining increasing mediatives, such as making substantial charitable attention, as is the need for technological anddonations, while simultaneously defrauding other innovations that address pressingits investors. Ford Motor publicized a strong environmental challenges. These challengescommitment to reducing its environmental include air and water pollution, unsustain-impact while also lobbying against increases able fishing and harvesting, as well asin federal fuel economy standards. Besides increasing greenhouse gas emissions thatapparent hypocrisy, these examples illustrate according to the 2007 Intergovernmentalthat to optimize progress in addressing social Panel on Climate Change almost certainlyand environmental challenges, organiza- lead to global warming.tional initiatives, public policies, and corpo- Catastrophic consequences likely torate regulators must work in concert. The result from global warming include increas-Human Rights Watch 2006 annual report ing Category 4 and 5 hurricanes, rising searevealed that firms such as Google have con- levels devastating coastal areas worldwide,cluded that CSR can place them at a compe- and the spread of harmful insects such astitive disadvantage by shutting them out of malaria-carrying mosquitoes. There is ancertain markets. If Google did not comply emerging consensus that such critical envir-with the Chinese government’s censorship onmental and social issues must bepolicies, they could not operate in China, addressed without delay and that, in addi-keeping them from doing business in the tion to public policy changes, organizationslargest emerging market for e-commerce have a responsibility and key role to play inand Internet use. As a result, large organiza- identifying and implementing remedialtions’ CSR initiatives increasingly include actions. This responsibility is underscoredlobbying for legally enforceable corporate by the increasing realization that both gov-standards that apply to all firms. Starbucks ernments and individuals can also ‘‘vote’’provides healthcare benefits to all employees their social preferences through what theywho work at least twenty hours a week and purchase, where and how hard they choosespends more on healthcare than on coffee to work, and where they invest.beans. Not surprisingly, Starbucks actively Enhancing organizational reputationadvocates for national healthcare legislation. was once the prime motivator for CSR. It isWal-Mart, General Electric, DuPont and a relatively easy to contribute money to a causegrowing number of other organizations simi- or place it in a corporate foundation withoutlarly all back some form of carbon regulation. a mandate for how the funds are to be spent or what outcomes are expected. With grow- ing recognition of looming human and envir- onmental crises, there is a groundswell ofDRIVERS OF CSR public and private sector organizations striv-Powerful social and political forces encou- ing to make measurable contributions torage organizations to act more responsibly. sustainability issues. Over 4,000 organiza- 127
  4. 4. TABLE 1 THE 10 PRINCIPLES OF THE UNITED NATIONS GLOBAL COMPACT Businesses should: Principle 1: Support and respect the protection of internationally proclaimed human rights Principle 2: Ensure that they are not complicit in human rights abuses Principle 3: Uphold the freedom of association and the effective recognition of the right to collective bargaining Principle 4: Eliminate all forms of forced and compulsory labor Principle 5: Abolish child labor Principle 6: Eliminate discrimination in respect of employment and occupation Principle 7: Support a precautionary approach to environmental challenges Principle 8: Undertake initiatives to promote greater environmental responsibility Principle 9: Encourage the development and diffusion of environmentally friendly technologies Principle 10: Work against corruption in all its forms, including extortion and briberytions from more than 100 countries are now initiatives. These include the need for growthmembers of the United Nations Global Com- in market share, organizational learning,pact (UNCG), established in 1999 by U.N. committed and engaged employees, suppor-Secretary General Kofi Annan. UNGC is an tive external stakeholders, and positiveinternational initiative that brings together investor relations.companies, UN agencies, labor organizationsand civil society in support of 10 principles Growth in Market Sharecovering human rights, labor, the environ-ment, and corruption. UNGC member orga- Positive consumer responses to an orga-nizations pledge to abide by and integrate nization’s CSR efforts have resulted ininto their business practices the 10 principles increased sales of premium priced productsoutlined in Table 1. and services. These include Fair Trade pro- Besides value-driven small to medium- ducts, whereby producers are paid an above-size companies, large corporations that are world-market price for their produce. Inactive members of the UNGC include BHP Great Britain, sales of Fair Trade productsBilliton and Foster’s Group (Australia), Ara- – including coffee, bananas, chocolate, andcruz Celulose and Petrobras (Brazil), Toshiba flowers – increased by 51% between 2003 andand Nissan (Japan), Cemex and Corporacion 2004.Durango (Mexico), BP and Royal Bank of CSR initiatives can also open up newScotland (United Kingdom), as well as Cisco markets, especially in developing economies.Systems and Coca-Cola (United States). Companies who find a way to engage withThousands of other organizations strive for the world’s poorest citizens have been help-CSR in concert with institutions that include ing to alleviate poverty and improve thethe 1% for the Planet Alliance, America’s economies of these countries, while also prof-Promise, Ashoka, the Aspen Institute, the iting from their efforts and creating newClinton Global Initiative, Net Impact, the customers and markets for their goods. Ara-Social Venture Network, the Organization vind Eye Hospitals in India perform 200,000for Economic Cooperation and Develop- cataract surgeries per year for roughly U.S.ment, and the World Business Council for $50 per patient. In 2001–2002, the hospitalsSustainable Development. Each of these posted a profit of U.S. $46.5 million. By crea-institutions provides helpful guidelines for tively using economies of scale, high produc-effective CSR initiatives that are reflected in tivity and top quality medical equipment,the following discussion. these hospitals restored the sight of hun- Organizational myopia regarding short- dreds of thousands of people. This in turnterm profitability can be addressed by stimulates the Indian economy by freeing upexploring how five key drivers of business both the blind, as well as those who cared forprosperity can be positively affected by CSR them, to enter the labor force and potentially128 ORGANIZATIONAL DYNAMICS
  5. 5. earn an income that ultimately helps to pay to work for a socially responsible firm.increase consumer spending. In concert with Peter Drucker once argued that CSR maypublic policy makers, healthcare organiza- become increasingly necessary to attracttions can explore viable business models the best available workers. A 2006 surveyfor broadening the base of essential health- of 2,100 M.B.A. students by Net Impactcare consumers within a range of other revealed that 59% of respondents planneddeveloping and developed economies. to seek socially responsible work immedi- ately upon graduation, and 79% indicated that they would seek out socially responsibleOrganizational Learning work at some point in their careers. These Cutting edge CSR is more than corporate results signal the growing importance ofphilanthropy. Strategic CSR programs pro- social and environmental engagement tovide opportunities for organizations to learn the generation now entering the workforce.from the projects they invest in and use that Besides enabling organizations to attractknowledge to build the organization’s core employees who are driven by socially con-competencies, while simultaneously improv- scious values, CSR can also keep theming social or environmental conditions. CSR engaged and eager to become increasinglyinitiatives can be used as learning labora- valuable to the organization. Anne Mulcahy,tories to study different ideas, methods, chairman and CEO of Xerox, chose to work atand processes without the time pressure Xerox because of the reputation of the salesand other typical constraints on the delivery department as a meritocracy, rather than anof commercially contracted products and old boy’s club. But she has stayed for moreservices. Knowledge gained through CSR than 30 years and counting because of aendeavors can flow back into the organiza- culture that broadly defined citizenship totion and drive new innovations throughout include how you treat your people, yourthe company. When Bell Atlantic undertook customers, your suppliers, and the commu-Project Explore in Union City, New Jersey in nities where we work and live. Because of itsthe early 1990s, it strived to improve inner commitment to corporate citizenship, Xeroxcity children’s learning with technology. did not just get a talented salesperson inDuring the process, Bell Atlantic developed Mulcahy. Instead they attracted and retainednew insights about networking technologies the future acclaimed CEO of the company.that more than justified the cost of the project. Highlighting to employees an organiza-These insights led to a patented and profit- tion’s positive social contributions can be aable technology that became Bell Atlantic powerful route for motivating and retainingInfospeed DSL. Strategic CSR undertakings committed and productive employees. Theprovide fertile ground for organizational medical technology company Medtroniclearning and innovation, while also benefit- conducts annual parties at which employeesing humanity and our deteriorating bio- meet patients whose lives have beensphere. improved by their products. According to the company’s founder and Director Emer- itus, Earl E. Bakken, ‘‘All Medtronic employ-Committed and Engaged ees have a ‘defining moment’ in which theyEmployees come face to face with a patient whose story A company attitude of fairness and com- deeply touches them.’’ Research by Adampassion often influences how employees feel Grant and colleagues has shown that whenabout the organizations, as well as how they organizations provide employees withact while performing their work. Research opportunities for appreciative contact withhas shown that potential employees are more the beneficiaries of their work, employeesattracted to socially responsible organiza- exhibit greater effort, persistence, and jobtions, and some are willing to receive less performance, compared with those who have 129
  6. 6. less opportunity to see how their work makes tions, the U.S. Environmental Protectiona positive difference. Agency successfully prosecuted BP under new laws requiring chemical plants and refi- ners to proactively identify where potentialExternal Stakeholders accidental spills or toxic releases could occur Acknowledging the need for CSR shows a and design preventative safeguards. BP com-company’s recognition that business and mitted to investing an additional $400 mil-society need each other if both are to thrive. lion in safety upgrades geared towardsExternal stakeholders can powerfully affect future accident prevention.organizational survival and prosperity.Healthy societies expand demand for busi- Financing and Investorness as more human needs are met and Relationsaspirations grow. Successful businesses con-tribute to robust economies and livable com- An organization’s CSR performancemunities, without which there would be attracts attention from financial analysts andfewer consumers of goods and services, investors. Ceres, a coalition of over 80 inves-resulting in less need for many businesses tor, environmental and public interest orga-to exist. nizations, periodically ranks 100 global External stakeholders often view CSR pro- corporations on their strategies for curbinggrams as a measure of the trustworthiness of greenhouse gases. There is a growing trendan organization. Thus, a favorable opinion of for investors to direct their money towardsa company’s CSR practices can solidify a explicitly socially responsible organizations.positive relationship between an organiza- The amount invested in ‘‘green’’ mutualtion and its stakeholders. Engaging stake- funds in the U.S. rose 695% in the last sixholders proactively can thereby help insure years. During the last three years, the amountthe success of a project. In 2007, when two of money invested in clean energy has reachedprivate equity firms sought advice for their U.S. $70.9 billion globally. Firms such as Citi-bid on the large utility company TXU, Gold- bank and Goldman Sachs carefully assess theman Sachs advised that the buyout plan be foreseeable environmental impact of theirmodified to accommodate more environ- lending decisions in developing countries.mentally sound practices. Specifically, Gold- Banks such as Wainwright Bank and Trustman Sachs urged their clients to insist that in Boston, as well as the New Resource Bank ofthe number of new coal-powered energy San Francisco offer discounted financing forplants TXU planned to build be drastically projects that will be built using ‘‘green’’ con-reduced from 11 to 3, and that the dollars struction standards. ShoreBank Corp of Chi-saved be invested in an alternative energy cago employs a triple bottom line managersource such as wind power. Acceptance of who assesses implications for people, planet,this advice pleased the environmental advo- and profits of loans for green building pro-cacy group Environmental Defense and jects. These trends highlight the increasingpaved the way for TXU board members to awareness of the need for environmentalaccept the buyout offer. stewardship and financiers’ desire to sponsor The potential peril of ignoring external companies that adopt CSR business practices.stakeholders is illustrated by the notoriously Poor CSR performance can converselyhuge costs of CSR activist protests and boy- have significant negative financial implica-cotts against firms such as Dow Chemical, tions. In May 2006, the California PublicLevi Strauss, Nike, and Shell Oil. In 2007, BP Employees’ Retirement System (CalPERS) –agreed to pay over $60 million in fines for the largest public pension fund in the U.S. –violations of the U.S. Clean Air Act in Texas banned investments in nine companies thatand Alaska. In addition to collecting the do business in Sudan, until the governmentlargest fine ever assessed for clean air viola- of Sudan halts the genocide that has resulted130 ORGANIZATIONAL DYNAMICS
  7. 7. in egregious human rights violations. For the board for organizational initiatives aimed atsame reason, major universities including creatively identifying and developing viable,Harvard, Yale, and Stanford also sold their value-adding and self-sustaining strategicshares in firms with substantial investments sustainability opportunities. In addition,in Sudan. In 2002, even before the start of the the organizations mentioned are not beingDarfur conflict, Talisman Energy of Canada endorsed for necessarily having high overallwithdrew from the Sudan after CSR-driven CSR. As mentioned, many organizations aredivestments by investors in the U.S. and strong in some areas of CSR performance andCanada led to a 35% decline in its share price. weak in others. Instead the following exam-Wall Street and investors worldwide are ples are offered merely to illustrate our sevenpaying attention to CSR. Their opinion of a strategic sustainability principles.particular business’ CSR is likely to increas-ingly impact its access to capital and the Principle 1: Cultivate Neededresulting fortune of companies who excel, Talentfail, or fall in-between with regard to CSRperformance. Like Standard Oil, Marriott International and Microsoft both undertake targeted CSR initiatives that cultivate suitable future employees for their businesses. In 1999, Mar-STRATEGIC CSR PRINCIPLES riott initiated a program called ‘‘Pathways toSeven strategic CSR principles and 21 exam- Independence’’ that taught chronic welfareples of CSR initiatives that illustrate these recipients life and job skills. In return, Mar-principles are presented in Table 2. These riott offered each program graduate a jobprinciples should not be interpreted as a from its employment openings. Topics cov-checklist of best practices, but as a spring- ered during the program include managing TABLE 2 STRATEGIC CSR PRINCIPLES AND EXEMPLARY PRACTICES STRATEGIC CSR PRINCIPLES CORPORATION EXEMPLARY STRATEGIC CSR PRACTICES 1. Cultivate needed talent Marriott Provide extraordinary career opportunities Microsoft Nurture required IT talent GlaxoSmithKline Expand access to medications 2. Develop new markets Philips Electronics Produce resource-efficient products Globe Telecom Create first-time consumers Whole Foods Specialize in organic products 3. Protect labor welfare Levi Strauss Replace exploitation with education Odegard & Rugmark Certify ethical production Starbucks Enhance farmers’ productivity and welfare 4. Reduce your DuPont Create more value and less ‘‘stuff’’ environmental footprint Ethel M Produce abundant life from wastewater Norsk Hydro Renew raw materials 5. Profit from by-products Fuji Xerox Redesign products for learning and profits Shaw Industries Adopt cradle-to-cradle manufacturing Manildra Convert grain and starch waste to fuels and food 6. Involve customers Target Enable customers to improve education Hewlett-Packard Reduce the environmental cost of IT use Patagonia Educate and engage customers 7. Green your supply chain Nestle Optimize transportation Wal-Mart Reduce packaging across the supply chain S.C. Johnson Identify, publicize and reward greener alternatives 131
  8. 8. finances and a household budget, how to soft made a $15 million software grant to thesearch for a job and improve one’s interview- African-American collegiate skills, workplace etiquette, and standards The resulting better-educated communityof professional conduct. college graduates help Microsoft address Marriott benefited from a wide pool of its significant shortage of IT workers, whilemore diverse and eager employees who have simultaneously providing celebrated educa-filled positions in a broad number of areas tional and career opportunities to tradition-including reservations, housekeeping, res- ally underrepresented populations withintaurant serving and cooking, grounds the software industry.keeping, luggage service, reception, and Attracting and retaining top scientificmaintenance. Pathways to Independence talent is also a major challenge in the com-also opened up career development oppor- petitive pharmaceutical industry, especiallytunities for participants by allowing them to in light of consumer backlash against thebegin obtaining the experience needed to high cost of medicine. GlaxoSmithKlineenter the ranks of Marriott management. (GSK) has taken steps to improve access toThe program substantially decreased turn- needed medications and vaccines around theover at Marriott. Seventy percent of program world. This sustainability commitment hasparticipants were still working for Marriott resulted in drawing leading scientific talentafter one year of employment. This retention to work for GSK. Initiatives include licensingrate is almost 50% better than the hotel indus- local companies in Africa to produce generictry average for hourly employees. Pathways versions of GSK’s patented AIDS medica-to Independence also helped revitalize inner tions, selling vaccines at volume, nonprofitcity economies by providing stable, well- discounts to developing countries, and ded-compensated employment opportunities to icating a team of researchers to develop athe chronically unemployed. Marriott in turn malaria vaccine.obtained the reciprocal benefit of growing It is rather unusual to find a pharmaceu-future employees and managers who are tical company directing R&D resources tofully immersed and largely committed to diseases such as malaria or avian influenza,Marriott’s ‘‘Spirit to Serve’’ corporate cul- as the bulk of the people who can benefitture. Marriott has also benefited from a range from the vaccine cannot pay cost, much lessof other community outreach partnerships the established retail price for inoculation.aimed at helping individuals (e.g., racial Many companies claim that drugs are sominorities and those with a disability) who expensive because of the high cost of R&D.face barriers to employment, as well as by Therefore, they do not look into developingaddressing environmental issues that affect compounds unless they can be sold at a pricethe communities in which it operates. that at least recoups the company’s cost of Microsoft has long experienced the need capital. GSK is somewhat unique in lookingfor a robust supply of skilled information beyond immediate profits to provide itstechnology (IT) workers. In 1997, Microsoft employees with an opportunity to workpursued a collaborative opportunity to bol- towards eradicating menacing diseases.ster the IT education infrastructure and make Employees claim to value working for GSKit possible for more college students to because their work is making a positive dif-receive the training necessary to prepare ference to the lives of millions.them for an IT career. In light of antiquated A hallmark of our knowledge economy istechnology, IT curricula, and faculty skills organizations engaging in a war for talent.within community colleges across the U.S., Three broad strategies for building an orga-Microsoft contributed software, volunteered nization’s capacity to attract and retain aexpertise, and provided $47 million to help motivated, skilled workforce are to offerthe American Association of Community extraordinary career opportunities, makeColleges address these issues. In 2003, Micro- community-based collaborative investments132 ORGANIZATIONAL DYNAMICS
  9. 9. to cultivate required talent pools, and pro- and 1% of transactions $20 and above. Thevide employees with opportunities to use program allows over 1.3 million people whotheir professional or occupational skills in cannot afford to have a bank account, or doways that directly help people in most need not live near a bank or landline telephone, toof assistance. now engage in banking and other consumer transactions. Beyond land-line infrastructure accessibil-Principle 2: Develop New ity issues, a large percentage of the world’sMarkets population is functionally illiterate, making Philips Electronics is a leading producer of the complexities of banking as practiced inenergy efficient appliances, lighting, and developed economies a significant challenge.medical equipment. Philips is also becoming Even illiterate individuals, however, oftena leader at expanding the market for its goods become competent and comfortable at bank-and services by tailoring its offerings to the ing by cell phone. Savvy companies such aslocal infrastructure and economy of develop- Globe Telecom, as well as Vodacom in Southing countries. One project involves the devel- Africa, have discovered that there is an enor-opment of traveling medical vans that bring mous untapped market for providing pro-primary healthcare to isolated villages in rural ducts and services to often overlooked andIndia. Using satellite technology, the vans link underserved populations.up with doctors in an urban center, allowing New markets can also be found in nichethem to diagnose and treat patients remotely. areas that attract the business of consumersAdditionally, Philips has introduced a low- seeking a more socially and environmentallycost water purification system and a wood- responsible lifestyle. A leader in one of theseburning stove that is smokeless, which helps niches is Whole Foods Market—an Austin,to decrease deaths related to pulmonary dis- Texas-based retailer of natural and organicease from exposure to cooking smoke. These foods that was founded in 1980 and is now aare desperately needed items that many com- Fortune 500 company. Whole Foods operatespanies have not invested in because the bot- close to 200 stores in locations throughout thetom line does not appear to justify the cost. U.S. and the U.K., making it the world’sHowever, as seen with the Aravind Eye Hos- largest natural and organic food supermar-pitals in India, substantial volume can drive ket chain. Whole Foods’ dramatic growthprofit. Meeting the needs of the developing provides compelling evidence that a seriousworld is a natural fit for the intersection of CSR commitment to CSR can be financially viable.and volume-based revenues. Whole Foods is selective about the pro- Globe Telecom’s ‘‘G-Bank’’ program is ducts it sells and is dedicated to maintaininganother example of this principle. This busi- the highest quality standards, while requir-ness capitalizes on the fact that the infrastruc- ing fair labor standards and sustainable agri-ture for mobile telecommunications has culture. Central to the Whole Foodsexpanded exponentially across the globe philosophy is the belief that ‘‘companies, likeduring the past decade. The same cannot individuals, must assume their share ofbe said for bank branches or traditional land- responsibility as tenants of Planet Earth.’’line telephone infrastructure in remote sec- This is a primary reason for the company’sond- and third-world villages. Located in the active support of organic farming, which isPhilippines, Globe Telecom enables custo- widely seen as the best method for the pro-mers to use text messaging and prepaid motion of sustainable agriculture. Organicphone cards to send and receive cash via agricultural practices provide tangible bene-their cell phones. They can also pay bills or fits to the health and safety of farm workers,purchase goods at stores. This innovative who are no longer exposed to dangerousprogram makes money for Globe, which chemicals and pesticides that are often usedcharges 20 cents for transactions below $20, by large industrial agricultural companies. 133
  10. 10. Whole Foods’ social and environmental to school, while the company continued tocredentials are increased by habitual engage- pay their wages. Upon completion of theirment in community initiatives, such as sup- schooling, a job awaited them at the factory,porting local area food banks, sponsoring provided that the applicant could provideneighborhood events, and contributing a their school completion certificate. Becauseminimum of 5% of total net profits to not- many Bangladeshi people appear youngerfor-profit organizations. Whole Foods addi- than their chronological age, the companytionally provides employees paid time off for provides dental exams to help screen appli-community service work. Whole Foods was cants who do not have a school certificate,rated by Fortune magazine as one of the ‘‘100 but are old enough to be employed. ThisBest Companies to Work For’’ for the tenth helps prevent the unnecessary rejection ofconsecutive year in 2007. The employee age-qualified potential employees. Encour-enthusiasm and commitment reflected by aged by Levi Strauss’s example, the Bangla-this achievement probably fueled Whole desh Garment Manufacturers and ExportersFoods’ growth and retention of its socially Association and other trade groups haveconscious customer base. given $1 million to support underage work- Growth is often essential to organizational ers’ education.prosperity. Anticipating and catering to the Odegard addresses child labor exploita-emerging markets for eco-friendly products tion issues in the luxury rug industry. Ste-and services, as well as adapting offerings phanie Odegard started a design companyand business models to tap previously that promotes rugs that are certified as beingneglected markets, are opportunities for made under fair labor conditions. Manybusiness growth that also sustain humanity developing countries in the Middle Eastand our biosphere. and South Asia count fine rugs as one of the backbones of their economies. Children are valued as laborers for several reasons:Principle 3: Protect Labor their small fingers and sharp eyesight makeWelfare them gifted at the detailed work of crafting Ensuring that products are made without rugs and they have greater stamina thanchild labor is a concern for many companies, adults to work hard for long hours in hot,especially those that have been caught in the dusty, and cramped factories. Odegardcrosshairs for doing so in their overseas fac- decided to take her mission a step furthertories. One classic case of how this predica- and so helped to found a nonprofit organiza-ment can be addressed involves Levi Strauss, tion, Rugmark, which certifies that rugs area company that tackled this legal and public made without child labor. The certificationrelations problem with a creative CSR solu- provides interior designers and consumerstion. To address the substantial backlash with assurance that the rugs they purchaseagainst employing children younger than are not the product of child exploitation. The15 years of age, Levi Strauss considered sim- growth of Rugmark certified products as aply firing all the child laborers. However, fashionable choice in the design industryanalysis of the labor market in Bangladesh helps to promote the reduction of child labormade clear that in a significant number of in rug manufacturing. The initiative hasfamilies, these children were the sole bread- helped take 10% of an estimated 300,000winners. Losing the factory work would child rug laborers away from the loom andhave had dire consequences for the children put them back in school. It also potentiallyand the family members who depended on helps raise awareness and concern with elim-the childrens’ wages. inating exploitative labor practices in other Realizing the devastation this would industries.cause, Levi Strauss developed an innovative Starbucks takes a holistic approach in theirsolution. All children under age 15 went back efforts to enhance labor welfare. The com-134 ORGANIZATIONAL DYNAMICS
  11. 11. pany has a range of programs designed to have most of the desirable characteristics ofhelp coffee farmers build profitable and sus- older materials such as nylon, Dacron, andtainable businesses. The Farmer Support Lycra. However, unlike its predecessors,Center in Costa Rica offers training and tech- Sonora is produced using fermented cornnical support on farming practices that result sugar, a renewable resource, rather thanin the growth of high quality coffee. Star- the petrochemical-derived materials itbucks’ policy is to pay premium prices for replaces. Knowledge intensity is increasedcoffee beans in order to provide farmers with by initiatives including the creation of Sim-a living wage that allows them to support plyengineering, which generates revenuetheir families and grow their business. The from selling copyrighted engineering guide-company also has programs that provide lines, calculations, and models, as well asfarmers with affordable loans, increasing SafeReturns, a DuPont consultancy thattheir ability to invest in their farms and build helped Texas Instruments reduce its work-a sustainable business. To reward farmers place injuries by 65%.who practice socially and environmentally The environmental sustainability attainedresponsible farming practices, Starbucks by DuPont’s integrated science and knowl-has established guidelines that allow suppli- edge intensity strategies is assessed with aers to qualify for preferred seller status. customized metric called the ‘‘shareholder One of Starbucks’ overarching business value added per pound of production’’philosophies is that the health of their busi- (SVB/lb). According to DuPont chairmanness is only as robust as that of the many and CEO Chad Holliday, this metric helpsfarmers from whom they purchase coffee. DuPont focus on shareholder value creationThus, money invested in fostering the through increased productivity, wastelong-term welfare, viability, and prosperity reduction, and the development of new ser-of their suppliers is considered as an essential vices and other sources of revenue genera-business investment. The rapid growth in tion, while helping meet this chemicaldemand for the premium-priced coffee pro- company’s stretch goals for decreasingducts sold by Starbucks illustrates the poten- energy consumption and toxic emissions—tial viability of this business policy. all essentially by producing ‘‘more value and During the closing decades of the 20th less stuff.’’century, minimizing labor costs was widely Ethel M operates a uniquely designedseen as imperative for organizational pros- wastewater treatment system at its chocolateperity and even survival. Levi Strauss, Ode- factory in Las Vegas, Nevada. Adjacent to thegard & Rugmark, as well as Starbucks, factory is the ‘‘Living Machine,’’ an ecosys-highlight that organizations can indeed do tem containing plants, snails, bacteria, fish,well while striving to safeguard the liveli- and other organisms. Distributed throughouthood and well-being of their labor force. an acre of tanks, marshes, and reed beds, the factory’s wastewater enters the Living Machine and is ‘‘treated’’ by being processedPrinciple 4: Reduce Your through and by the living inhabitants inside.Environmental Footprint The water is then reused for industrial pur- DuPont seeks to increase its financial pros- poses. Visitors to the factory can take a self-perity through strategies that simultaneously guided tour, view the chocolate manufactur-produce demonstrable reductions in the ing process, sample the company’s products,organization’s environmental footprint. Stra- and then explore the Living Machine andtegies for sustainable development include view examples of ‘‘before’’ and ‘‘after’’ trea-integrated science and knowledge intensity. ted water. Treated water is reused within theDuPont integrates the scientific fields of factory where appropriate, as well as to washchemistry and bioengineering to produce a the company’s vehicle fleet and provide irri-new line of polymers, called Sorona, that gation for the botanical cactus garden located 135
  12. 12. on the property. The company makes a posi- technology and bottom line. After changingtive environmental difference, while also cul- their corporate strategy from selling to onlytivating its reputation and sales by leasing office equipment, Fuji Xerox beganreclaiming a natural resource and educating servicing rather than disposing of rentedits visitors on environmental sustainability. photocopying machines that no longer oper- Norsk Hydro strives to become more ated properly. Careful study and redesign ofenergy efficient while meeting the world’s a few key components – which cost as little asincreasing demand for aluminum. When the $140 – resulted in reconditioned equipmentcompany did a life cycle assessment, it dis- being restored to better-than-original work-covered that recycling aluminum used just ing order. This initiative saved the company5% of the energy needed to produce primary $14 million in its first year. Studying thealuminum. It is well known that aluminum kinds of malfunctions and defects thathas a key advantage of outstanding recycl- occurred and incorporating this knowledgeability, whereby its composition and quality into new product and parts design led tois not changed or altered in the recycling R&D advantages that resulted in even moreprocess. It can be remade into usable material reliable generations of office equipment thatover and over again, without any loss of its cost the company less to maintain. Organiza-integrity. Aluminum is used for airplane tional learning is also heightened as employ-bodies and propellers, door and window ees discover what works and what does notframes, furniture, beverage containers, when manufacturing, maintaining, andpower lines, and in components of televi- repairing products. The program has putsions, radios, refrigerators, and air condi- machines back into use that would otherwisetioners. Granted the widespread use of have been destined for landfill. The Austra-aluminum and the small fraction of energy lian division of Fuji Xerox is thus consideredused to recycle versus produce it, the poten- a model of strategic CSR for other Fuji Xeroxtial positive environmental impact of recy- divisions worldwide.cling aluminum is enormous. Of the 3.9 Shaw Industries’ $150 million commercialmillion tons of aluminum Norsk Hydro carpet and tile business has adopted a ‘‘cra-delivered to customers in 2005, approxi- dle to cradle’’ model. When carpet needsmately 1.8 million tons or 46% had been replacing, Shaw takes it back from the con-recycled. In doing so, companies such as sumer, breaks down the materials, and thenNorsk Hydro have both flourished and pro- uses those materials to make new carpet.tected the earth from some of the unneces- Often only heavily trafficked areas requiresary toxic by-products of superfluous carpet replacement; by servicing just thosealuminum production and landfill. spots, Shaw saves its customers money and Whether through new business strategies, perfectly good carpet is not removed andreduced energy consumption (not illustrated discarded. By changing the incentive struc-because examples and opportunities abound ture for keeping carpet for the full duration ofin this area), reuse, or recycling of products its useable life, the human and naturaland materials, there are countless ways for resources consumed in providing qualityorganizations to benefit from initiatives that carpeting is substantially reduced. This inno-serve to reduce their environmental foot- vative approach saves Shaw a great deal ofprints. money, as the price of raw materials now exceeds the cost of recycling old carpet into new. Interface, the world’s leading commer-Principle 5: Profit from cial and industrial carpet manufacturer alsoBy-products recycles through their ReEntry1 Carpet Fuji Xerox Australia exemplifies how new Reclamation Project. To date, Interface hasbusiness models that are good for the envir- recycled 84 million pounds of carpet thatonment can also help a company improve its would otherwise have gone to landfills,136 ORGANIZATIONAL DYNAMICS
  13. 13. where it takes an average of 50 years to checks are mailed directly to school princi-decompose. pals. This CSR program puts money into Manildra developed a range of innovative community schools across the United States.reuse processes that allow the company to Over $200 million has been contributed sincebenefit by putting its by-products to produc- the program’s inception. More than 2.5 mil-tive use. Started as a single flour mill in the lion customers have enrolled in the program.Shoalhaven region of Australia in 1952, Man- This initiative allows an individual with noildra has grown into an international proces- other connection to Target aside from being asor of grains and starches, as well as a global consumer of Target’s products to participateleader in using wheat for industrial pur- in a corporate wide CSR program and toposes. Manildra uses ‘‘waste’’ products from choose the educational beneficiary of theirgrain processing to make other useful sub- purchases.stances, profiting from what would other- Hewlett-Packard (HP) involves its custo-wise be discarded and helping to protect mers in recycling and energy reductionthe environment by creating less waste. Man- initiatives by offering educational contentildra’s ability to make comprehensive use of on their Web site. In ‘‘5 Steps to Greenertheir raw materials comes from over 50 years Computing,’’ tips are offered for reducingof increasing vertical integration. Starting the environmental impact of both businesswith grain and ‘‘waste starch,’’ Manildra and personal computer usage, ranging frommanufactures ethanol and agricultural feed. major initiatives to small changes in every-Effluent wastewater from the mill, used to day practices. Advice is offered regardingirrigate a farm located next to one of the organizational policies and checklists, recy-processing plants, contains organic nutrients cling policies, methods for disposal of usedand replaces harmful chemical fertilizers equipment (e.g., batteries), and applicabletypically used in agriculture. The farm government guidelines. HP provides a ‘‘takeannually produces over 10,000 tons of back’’ recycling program for all of its pro-organic rye grass that is used for feed by ducts and advocates recycling all used ITthe local cattle and dairy industries. By the equipment. Small actions such as buyingtime the wheat and all by-products have been recycled paper, using both sides of paperprocessed, little waste is left over, achieving a before recycling, and utilizing the low powerminimal environmental footprint. states on electronic devices can together sub- Adoption of Manildra’s practices by other stantially reduce energy consumption. HPgrain processors could help increase the also strives to raise awareness of sustainableavailability of ethanol for alternative fuel, issues and practices among all its employees,as well as reducing unnecessary and harmful as well as throughout the IT industry.CO2 emissions. The sustainability initiatives Beyond its educational initiatives, HP hasof Fuji Xerox, Shaw Industries, and Manildra recycled more than 1 billion pounds of elec-illustrate how useful lessons and valuable tronic equipment. Its goal is to double thatresources can be derived by the prudent number by 2010.analysis and utilization of an organization’s Patagonia, a leading manufacturer ofby-products. environmentally protective outdoor clothing and recreation equipment, involves its cus- tomers in its CSR by using a mail orderPrinciple 6: Involve Customers catalog and Web site as forums for education Since 1997, Target has contributed 1% of about social and environmental issues. Inall purchases at Target stores and 1/2 percent 1972, the company published a catalog withof all other purchases charged to a Target an essay by founder and owner Yvon Choui-credit card to benefit the elementary, junior nard entitled ‘‘Clean Climbing.’’ Chouinardhigh, or high school of the cardholder’s advocated the use of climbing equipmentchoice. In March and September each year, that does not scar or destroy rock in the 137
  14. 14. climbing process. He counseled his readers focus on reducing waste and consumptionto heed the words of 19th century environ- ´ of resources. Since 1991, Nestle has reducedmentalist John Muir: ‘‘Leave no mark except its use of packaging materials by 315,000your shadow.’’ The response was so positive tons. To minimize impact after finishedthat Patagonia has continued to use the cat- goods leave the manufacturing facility, Nes-alog, as well as more recently their Web site, ´ tle strives to optimize shipments and part-as an avenue for dialogue with their custo- ners with other producers to share availablemers. Chouinard is deeply committed to space on trucks and rail cars to maximize theprotection of the environment, and Patago- amount of goods that can be moved per trip.nia’s catalog and Web site have served as key Another transportation efficiency tool is themedia for advocating and guiding environ- use of software that optimizes pallet place-mental involvement and preservation. Each ment, which maximizes usable space andissue of the catalog contains a balance of reduces the amount of travel needed to shiproughly 55% products and 45% ‘‘message’’ goods to their final destination. Each of these– the articles and original thought pieces initiatives not only saves transportationrelated to social and environmental topics, costs, it also reduces the adverse environ-often written by Patagonia customers. Inter- mental effects of transportation, whichestingly, Patagonia documented that chan- invariably include energy use and pollution.ging this balance in favor of devoting more Wal-Mart, often criticized for its practicesspace to products resulted in a decrease in towards employees and the environment, issales. Patagonia thus identified a way to attempting to use its power in the market-actively engage their customers with envir- place to proactively require more humaneonmental issues and opportunities of mutual labor conditions, such as a living wage, asconcern, while involving them in the com- well as sustainable harvesting and produc-pany’s growth and CSR efforts. tion practices by Wal-Mart’s suppliers. In It is becoming undeniable that at least in 2008, Wal-Mart plans to begin measuringcertain markets, customers care about the its 60,000 worldwide suppliers on how wellenvironmental and human consequences of they reduce packaging and conserve naturaltheir buying and consumption habits. Provid- resources. Wal-Mart expects a 5% reductioning customers with viable concrete actions in overall packaging to keep millions ofthey can take that will make a positive differ- pounds of trash from entering landfills,ence, as well as insights and information that thereby keeping 667,000 metric tons of car-illuminate the helpful consequences of their bon dioxide from entering the atmosphere.collective action, is a relatively inexpensive This is the CO2 equivalent of taking 213,000though socially and environmentally useful trucks off the road, using 323,800 less tons ofway to foster customer loyalty. coal, and 66.7 million gallons less diesel fuel. Wal-Mart CEO Lee Scott elaborates on this point: ‘‘Even small changes to packagingPrinciple 7: Develop a Green have a significant ripple effect. ImprovedSupply Chain packaging means less waste, fewer materials ´ Nestle the largest food and beverage com- used, and savings on transportation, manu-pany in the world and a prominent member facturing, shipping, and storage.’’of the U.N. Global Compact, uses a variety of S.C. Johnson & Son has a long history ofpractices throughout their supply chain environmentally friendly practices, but theiraimed at environmental protection. Begin- pinnacle achievement occurred in 2001 withning with raw materials and ingredients the development of a unique and highly ´purchased for use in Nestle products, strict influential environmental reference docu-quality controls include limiting potential ment: the GreenlistTM. It classifies raw mate- ´environmental contaminants. Nestle’s fac- rials based on their environmental impactstories employ processing technologies that and is designed to improve the development138 ORGANIZATIONAL DYNAMICS
  15. 15. process of S.C. Johnson products. The format MAKING STRATEGIC CSRof the Greenlist allows users to compare HAPPENsubstances listed with one another in terms The organizational benefits of strategic CSRof their environmental and human health can be substantial, but so too are the potentialimplications. The system rates ingredients challenges encountered in making the orga-on a scale of 0–3. A substance with a rating nizational changes needed to implementof 0 is classified as a restricted material and strategic CSR. Five guidelines for puttingsenior management must directly approve strategic CSR into action are as follows.its use in a product. The culture at SC John-son strongly discourages the request forapproval of a ‘‘0’’ rated ingredient because Focus your CSR Initiativesthe company is so dedicated to reducing its Based on careful analysis of your organi-environmental impact. Substances that rate a zation’s strategic challenges and opportu-‘‘1’’ are deemed acceptable, ‘‘2’’ is better, and nities, initially focus on just a few CSRa rating of ‘‘3’’ indicates this is the best choice initiatives with the most promise to yieldfor people and the environment. The Green- both business value and social/environmen-list is available on line to all S.C. Johnson tal contribution. Prioritizing in this way canscientists, allowing them instant access to the provide the focus needed to attain substan-best-rated ingredients for the product or pro- tial positive CSR and business outcomes,cess under development. Employees receive rather than diluting organizational resourcesincentives in the form of annual merit with an overly ambitious range of CSR initia-increases and bonuses for using the best- tives.rated materials, and the company creates a Focus is facilitated by establishing a com-greener supply chain by encouraging suppli- pelling CSR vision, together with clear state-ers to offer products that rate highly on the ments about what that vision does and doesGreenlist. Since the program started, S.C. not encompass. BP’s vision of ‘‘Beyond Pet-Johnson has reduced the amount of volatile roleum’’ is elaborated with the explicit state-organic compounds (VOCs) in the environ- ment that it does not mean that BP isment by over 10 million pounds. Use of the abandoning oil and gas, getting out of hydro-Greenlist criteria reduces the amount of carbons, or focusing only on alternativesVOCs used by 2.6 million pounds annually. (e.g., renewable energy sources). Rather, Like Wal-Mart, Starbucks, and Whole what Beyond Petroleum does entail includesFoods, S.C. Johnson is sharing its innovations developing new ways to produce and supplywith its suppliers so as to green the company’s oil and gas – through clean fuels, throughentire supply chain. S.C. Johnson has further greater efficiency, and through substitution –leveraged the positive impact of its Greenlist as well as developing new fuels that can overby sharing it with the U.S. Environmental the long term begin to provide new energyProtection Agency, Environment Canada, choices.the Chinese EPA, the U.K.’s Forum for theFuture, the World Business Council on Sus-tainable Development, industry associations, Identify and Engage Relevantuniversities, corporations, and others. We pre- Stakeholdersdict that these examples of CSR undertakings ´by Nestle, Wal-Mart, and S.C. Johnson merely Stakeholders encompass employees, man-foreshadow the types of logistical, incentive, agers, suppliers, subcontractors, customers,role-modeling, standard setting, and informa- shareholders, local communities, govern-tion-sharing initiatives that innovative orga- ment regulators, and interest groups.nizations will develop and apply to have a Although interest groups do not necessarilylucrative and substantial positive human and have a contractual connection to an organi-environmental impact. zation, their power to influence public opi- 139
  16. 16. nion and organizational outcomes can be guidelines, however, raised cynicism aboutsubstantial. A Greenpeace campaign against Google’s corporate philosophies thatShell U.K. exemplifies the impact interest ‘‘Democracy on the web works’’ and thatgroups can have on organizational opera- ‘‘You can make money without doing evil.’’tions. Shell wanted to dispose of the Brent Reducing costs by moving productionSpar, an off-shore oil storage tank, by sinking overseas can trigger thorny ethical dilem-it into the deep waters of the North Sea off the mas. These include decimating the viabilitycoast of Scotland. After research identifying of small communities that are highly depen-the deep-sea disposal method as the most dent on a particular manufacturing facility,environmentally sound option, Shell as well as the challenge of ensuring thatobtained the British government’s support cheap production costs are not the result offor this course of action. However, Shell human exploitation. Maintaining quality andfailed to include environmental advocacy safety standards is also more difficult whengroups in the decision-making process, and production is outsourced, exemplified byGreenpeace mounted a costly campaign to problems encountered with toys, toothpaste,stop Shell’s proposed disposal of the tank. and pet food produced in China. After three months of falling share prices Ethical issues will arise for organizationsand public boycotts, Shell announced they planning strategic CSR initiatives, so carefulwould no longer pursue the deep-sea dispo- analysis and sound reasoning is required.sal of the Brent Spar. The storage tank was Organizational leaders need to carefully con-eventually moved intact to a Norwegian sider relevant ethical principles that pertainfjord, a process that probably led to more to their business operations, such as thoseenvironmental harm than Shell’s original produced by the UNGC and outlined inplan. Both sides incurred battle scars in the Table 1, as well as other sources identifiedprocess: Shell lost money, customers, and in the selected bibliography. After examiningshareholders. Greenpeace lost credibility relevant ethical guidelines, one well-knownwhen investigations revealed it had grossly heuristic is to avoid actions that you wouldover-estimated the amount of oil left in the regret seeing on the front page of a news-storage tank, thus misrepresenting the paper. Realize that in practice ethical princi-amount of potential environmental damage ples often conflict, necessitating a reasonedthat could have occurred. Proactive engage- assessment of the short-, medium-, and long-ment with environmental stakeholders early term foreseeable positive and negative con-in the process – which is increasingly the sequences for all stakeholders of adopting anorm, especially for potentially environmen- particular major organizational initiative.tally sensitive projects – would have saved Engaging with stakeholders to craft uniqueShell the substantial financial and other costs solutions – as illustrated earlier by how Leviincurred by striving to merely meet environ- Strauss dealt with its child labor issue – canmental regulatory requirements. be challenging though prudent. Finally, appointing a devil’s advocate can help high- light blind spots or flawed reasoning in ethi-Grapple with Inevitable Ethical cal analyses.Dilemmas Methodically working through ethical Implementing strategic CSR routinely issues helps to ensure that CSR initiatives passposes ethical challenges for organizations. the scrutiny and win the approval of relevantConducting business directly in China stakeholders. Indeed, proactive managementenabled Google to dramatically increase its of ethics is critical not only for attractingmarket share and ostensibly expand the employees, customers, and investors con-potential access to information of over a cerned with CSR, but also for avoiding thebillion people. Doing so in accordance with potentially devastating wrath of regulators,the Chinese government’s strict censorship interest groups and investors who are eager to140 ORGANIZATIONAL DYNAMICS
  17. 17. expose and dissociate themselves from orga- can be a useful source of CSR measurementnizations with questionable ethics. ideas, quality metrics tend to be crafted to provide both financial and nonfinancial indi- cators of an organization’s progress againstDevelop Appropriate Metrics its unique CSR goals. What gets measured in organizations iswhat gets done. Organizations first embark- Embed in Senior Leadership anding on a path to strategic CSR need to make a with Rewardsfundamental shift in measurement systemsbeyond traditional operational and financial Valuable strategic CSR opportunities canmetrics. The triple-bottom-line perspective of emanate from any level within an organiza-assessing the impact of organizational opera- tion, or even from outside it. Senior manage-tions on people and planet, as well as profits, ment nonetheless needs to play a crucial rolecan be helpful in this regard. in championing, guiding, and nurturing The Leadership in Energy and Environ- potential CSR initiatives if they are to becomemental Design (LEED) Green Building Rat- a fundamental aspect of business operationsing SystemTM provides building designers, – and thereby a strategic imperative, ratherdevelopers, owners, and operators with per- than merely a transient, ostentatious expres-formance measures in five key areas of sion of ‘‘good will.’’ During the early imple-human and environmental health: sustain- mentation of CSR initiatives, at least someable site development, water savings, energy people tend to refuse to buy in. It can takeefficiency, materials selection, and indoor time and perseverance for all organizationalenvironmental quality. LEED materials members to appreciate the business impera-selection criteria include using building tive and benefits of truly strategic CSR initia-materials that have been extracted or manu- tives, rather than dismissing them as merelyfactured from within 500 miles of the project keeping up with business fashion, as mani-site, thereby supporting the use of indigen- fested through cynical expressions such asous resources and reducing the adverse ‘‘this, too, will pass. . .’’environmental impacts resulting from trans- To weave strategic CSR into the fabric ofportation. Potential financial incentives for corporate culture, senior leaders need tocomplying with such standards are illu- unambiguously and consistently expressstrated by the Embrey Engineering Building their commitment to whatever strategicat Southern Methodist University which CSR initiatives an organization chooses toreceived additional donations as a result of adopt. Involvement and commitment withcertification that it had been designed and CSR initiatives needs to be recognizedconstructed to the LEED Gold Standard. through organizational reward systems,Similarly, Texas Instruments’ (TI) new thereby helping to integrate strategic CSRLEED-certified manufacturing facility in into organizational culture. This persua-Richardson, Texas was built under budget sively communicates to employees the orga-and is expected to save TI $4 million in nizational value of pursuing and attainingenergy costs annually from the environmen- strategic CSR objectives.tally friendly innovations designed into thebuilding. Further ideas for CSR metrics may begleaned from CSR institutions including Sus- CONCLUSIONtainAbility (, theUnited Nations Global Compact (www.un- There is no business to be done on a, and the World Busi- planet.ness Council for Sustainable Development –David Brower, Executive Director,( While such resources Sierra Club 141
  18. 18. Exxon Mobil argues that other organiza- ders who are not inherently passionate abouttions have more competence at tackling addressing environmental or social issues.environmental issues than it does, so it is As mentioned, engaging in strategic CSRbetter for Exxon to leave that market segment can yield growth in market share, increasedto them. Viewed in light of Exxon’s recent organizational learning, retention of deeplyfinancial triumphs, this perspective high- engaged employees, support from externallights that CSR is not a panacea for organiza- stakeholders, and favorable relationshipstional prosperity with appeal to all with investors.organizations. A growing multitude of organizations Jeff Immelt, the CEO who pioneered and are finding innovative and prosperous wayschampions GE’s ‘‘Ecomagination’’ strategy to grow their business while simultaneouslywas asked recently: ‘‘Do you recycle?’’ His helping people in need and sustaining ourresponse: ‘‘I’m not sure. Maybe somebody in fragile planet. The principles we have offeredmy house does. It’s not like I’m Johnny will hopefully inspire and guide many otherAppleseed here. This is purely about the organizations to identify unique, viable, andscience of business. I don’t consider myself worthwhile opportunities to nurture theiran environmentalist. I’m a business leader business prosperity, as well as the commu-who says this is an important trend.’’ While nities in which we and future generationsStarbuck’s chairman Howard Schultz clearly live and work.sees CSR as both a moral and businessimperative, Immelt’s comment illustrateshow CSR can make good sense even to lea-142 ORGANIZATIONAL DYNAMICS
  19. 19. SELECTED BIBLIOGRAPHYThe relationship between CSR and financial C. K. Prahalad’s The Fortune at the Bottom ofperformance is documented by Marc the Pyramid (Upper Saddle River, N.J.: Whar-Orlitzky, Frank Schmidt, and Sara Rynes in ton School, 2006) provides many examples of‘‘Corporate Social and Financial Perfor- organizations that are creating viable busi-mance: A Meta-Analysis,’’ Organization Stu- ness opportunities in poor, underdevelopeddies, 2003, 24, 403–441, as well as in ‘‘Misery markets.Loves Companies: Rethinking Social Initia- Comprehensive practical guidelines fortives by Business,’’ J. D. Margolis & J. P. leading the implementation of CSR initia-Walsh, Administrative Science Quarterly, tives are provided by Dexter Dunphy,2003, 48, 268–305. Andrew Griffiths, & Suzanne Benn in Orga- For further useful insights about strate- nizational Change for Corporate Sustainabilitygic CSR opportunities, metrics, and ethical (New York: Routledge, 2007). Analysis of theprinciples, see: 1% For the Planet Alliance potential rewards and pitfalls of engaging in(, Ameri- CSR are discussed by Daniel Vogel in Theca’s Promise (, Market for Virtue: The Potential and Limits ofAshoka (, the Aspen Corporate Social Responsibility (Washington,Institute (, the D.C.: Brookings, 2006). For insights on devel-Clinton Global Initiative (www.clintongloba- oping sustainable metrics to assess, the Global Reporting Initia- attainments, see Chad Holliday’s ‘‘Sustain-tive (, able Growth, the DuPont Way,’’ HarvardMayors for Climate Protection ( Business Review, 2001, September, 129–134,, the Global Sullivan Principles as well as Dunphy et al. (2007).for Social Responsibility and Endorsers’ Best To learn more about how CSR can con-Practices (, Net Impact tribute to organizational learning, see ‘‘From(, the Organization Spare Change to Real Change’’ by Rosabethfor Economic Cooperation and Development Moss Kanter, Harvard Business Review, 1999,(, the Social Venture Net- May/June, 122–132, as well as Dunphy et (, SustainAbility (2007). Keeping employees engaged and com-(, the United mitted to one’s organization is discussed inNations Global Compact (www.unglobal- Daniel Turban and Daniel Greening’s ‘‘, and the World Business porate Social Performance and Organiza-Council for Sustainable Development tional Attractiveness to Prospective( Employees,’’ Academy of Management Journal, ‘‘Strategy and Society: The Link Between 1996, 40, 658–672; and Jeff Barbian’s ‘‘TheCompetitive Advantage and Corporate Charitable Worker’’ Training, 2001, 38, 50–Social Responsibility,’’ by Michael Porter 55. ‘‘Impact and the Art of Motivation Main-and Mark Kramer (Harvard Business Review, tenance: The Effects of Contact with Benefici-2006, December, 78–92), outlines the concept aries on Persistence Behavior,’’ Organizationalof strategic CSR and provides a framework Behavior & Human Decision Processes, 2007, 103,for evaluating how a proposed CSR initiative 53–67, by Adam M. Grant, Elizabeth M.fits into an organization’s business strategy. Campbell, Grace Chen, Keenan Cottone, 143
  20. 20. David Lapedis, and Karen Lee, documents To learn more about the exemplary stra-motivation as a function contact with the tegic CSR initiatives featured in this paper,beneficiaries of prosocial work. For more on see Hewlett-Packard ( relationship between CSR and external hpinfo/globalcitizenship/environment/stakeholders, see Porter and Kramer (2006), index.html), Interface ( well as Michael Barnett’s ‘‘Stakeholder com/images/photos/ReEntry_demo.html,Influence Capacity and the Variability of Levi Strauss ( Returns to Corporate Social Respon- Citizenship/CaseStudies.aspx,),sibility,’’ Academy of Management Review, 2007, Manildra Group (, 794–816. frameset. htm), Nestle ( For information on the impact of CSR on Shared ValueCSR/), Norsk Hydroinvestor relations, see Alison Mackey, Tyson (www.hydro. com/en/global_commitment/Mackey, and Jay Barney’s ‘‘Corporate Social environment/resource_management/), Star-Responsibility and Firm Performance: Inves- bucks ( Preferences and Corporate Strategies,’’ ns.asp), Target Stores (http://Academy of Management Review, 2007, 32,, Wal-Mart (http:walmart-817–835; ‘‘How To Make a Buck Green’’ by, andJane Bryant Quinn, Newsweek, April 12, 2007, Whole Foods (–66; and ‘‘The Street Turns Green’’ by John- company/index.html).nie Roberts, Newsweek, March 12, 2007, 40. Peter A. Heslin is assistant professor of management at the Cox School of Business, Southern Methodist University, Dallas, TX. He received his Ph.D. in organizational behavior and human resource management from the Rotman School of Management, University of Toronto. Heslin teaches graduate courses in organization behavior, leading organizational change, and managing across cultures. He has consulted in these areas to corporations including Citibank, IBM, Zurich Insurance, KPMG, and Procter & Gamble. Peter has authored or co-authored over a dozen articles published in journals such as Applied Psychology: An International Review, Journal of Applied Psychology, Journal of Organizational Behavior, Journal of Occupational & Organizational Psychology, Organizational Dynamics, and Personnel Psychology (Tel.: +1 214 768 4170; e-mail:; Jenna D. Ochoa is a corporate relief pharmacist for Tom Thumb, a division of Safeway. She serves as an interim manager in a range of Tom Thumb pharmacies throughout the Dallas/Fort Worth Metroplex. Ochoa also serves as a volunteer pharmacist at the Collin County Adult Clinic, as well as a subject matter expert for the Health and Sciences Television Network. After completing a B.S. (Pharmacy) at the University of Texas at Austin, Ochoa worked as a staff pharmacist for three intensive care units at the Presbyterian Hospital of Dallas. Subsequently she worked as a consulting pharmacist at Merck-Medco, LLC. Since completing her Professional M.B.A. at Southern Methodist University, Ochoa is in the process of transitioning into a management and strategy consulting role, with a focus on addressing strategic sustainability opportunities within the healthcare industry (Tel.: +1 214 403 2846; e-mail: ORGANIZATIONAL DYNAMICS